Weak economy will take toll on cement consumption

Published:
09 May 2008

With the US economy experiencing a severe economic weakness, its impact on cement consumption and the construction industry will not be mild, according to the latest Portland Cement Association (PCA) forecast of cement, concrete, and construction.

In 2008, Portland cement consumption is expected to drop 11 per cent, followed by an additional 5.5 per cent in 2009. PCA predicts total cement consumption in this year to be 101.7Mt.

A record consumption of 128Mt was reached in 2005. Peak-to-trough declines in consumption will total nearly 30Mt, marking one of the worst industry downturns since the Great Depression.

"We are currently in the third year of a four-year industry contraction that began in 2006," Edward Sullivan, PCA chief economist said. "High fuel prices, slow job creation, and tight lending standards will all adversely impact the entire spectrum of construction activity."

Sullivan anticipates that while harsh residential conditions continue to act as a significant drag on cement consumption, the nonresidential sector will also see large declines for the next two years.

"Although it grew nearly 11 per cent in 2007, nonresidential construction spending is expected to fall almost eight per cent in 2008 and another 12 per cent in 2009," Sullivan said. "Nonresidential construction is closely tied to economic activity. As the economy softens, the expected return on commercial investments decline, reducing the incentive to build and expand."

An additional slowdown in public construction, which accounts for nearly half of total cement consumption in the United States, is predicted for 2009 and will continue through 2010.

PCA targets the second half of 2010 with the trend of strong growth in cement consumption. By this time, according to the PCA report, all regions of the United States should be experiencing a recovery in housing and nonresidential construction will be on the upswing.